Ten duds small investors

The $16 million shortfall on Ten Network’s $55 million retail entitlement offer has confirmed, once again, how boards conspire with investment banking underwriters to dilute small investors (“Ten capital raising suffers $16m shortfall”, AFR, January 23.)

With Ten shares trading at 35¢, there was an instant 75 per cent return to be had on the heavily discounted 4-for-5 offer at 20¢.

However, because Ten Network directors failed to negotiate a bookbuild to auction off the shortfall or an ability for participating retail shareholders to apply for additional shares, we have the un-named clients of underwriter Citi pocketing windfall gains on 80 million discounted shares.

This constitutes $12 million of value diluted across from the non-participating retail investors to the big end of town.

It remains a mystery why the four billionaires who control 43 per cent of Ten Network felt the need to pay Citi more than $4 million to provide this lucrative service. Surely the likes of Gina Rinehart, James Packer, Lachlan Murdoch and Bruce Gordon could have under-written the retail component themselves.